Up to the 13. November, Rome time, the budget plan needs to be amended. Otherwise might be able to threaten in the history of the monetary Union sanctions. The debt crisis in Italy, says more about the Euro than about the country.
The Italian government debt is over 130 percent of annual economic output. In the Eurozone, only Greece has proportionally more debt. To get out of this debt quagmire, had promised the previous government in Rome, in the planning of the budget is not more than 0.8 percent of the gross domestic product (GDP) for new debt to spend. The new left-right populist coalition government does not feel bound. In the middle of October, presented the budget plan for 2019, the three fold is provided on new debt.
Prof. Joachim Starbatty, an Economist and member of the European Parliament
The Euro critic Joachim Starbatty, an Economist and member of the European Parliament, assumes that the actual budget deficit is far more than the reported 2.4 percent. “This figure is based on assumptions that are unrealistic. If the growth rate and the unemployment rate realistically, if you scoured some of the expenditure, then the deficit would have to be significantly above three percent,” said Starbatty, opposite the Deutsche Welle. This is the reason for the great concern of the EU Commission.
Design flaws of the Euro
The also revealed the first birth defect of the common currency: a Separate fiscal policy in the case of a common money. “As you have decided to the currency pool, it was not willing and also not able to standardize the financial policy,” says Berthold Busch from the Institute of German economy (IW) in Cologne. An attempt had been made on the rules of the stability Pact and macro-economic Surveillance, in the fiscal policy approach, the Economist in an interview with DW.
Another birth defect of the Euro rules is visible: The Stability (upper limit of the debt) were injured hundreds of times. The agreed sanctions were not a single Time, since the decision had been violence at the heads of government. In other words, the Potential debt-sinners judging fellow sinners. There was indulgence programmed. In the course of the debt crisis, this rule has been changed: Now, the EU Commission may decide on sanctions alone, which is the Economics Commissioner, Pierre Moscovici, in the direction of Rome threatened. IW-expert Bush does not exclude this time, it could actually come to punitive measures. Because a new Dimension has been reached: “in the past, the policy has never been questioned. It was always a flexible interpretation. Now we have the case that a country says: The rules are no longer interested in us.”
Without a red card yellow cards are useless
In spite of the threat from Brussels Joachim Starbatty believes that Italy will relent. Because a real pressure not to have the EU. You could at most show yellow cards. “If not a red card, the yellow card is worth nothing.”
With a red card expulsion from the common currency is meant to be. The Euro is designed as an eternal marriage without possibility of divorce. Although each country is allowed to leave the Euro zone, theoretically, voluntary. The emphasis is on “theoretically”. Neither the Greeks nor the Italians want to abandon the Euro. The reason is obvious: In the Euro-bond, sovereign debt in Euro, and thus in its own currency, what distinguishes Greece and Italy, and of other emerging countries such as Argentina, in US dollars and therefore foreign-currency debt.
Dr. Bethold Busch, an Economist at the Institute of German economy (IW)
Berthold Busch is hoped, nevertheless, pressure from another Front – the financial markets. “Currently, Italy has 480 billion euros of bonds that must be refinanced within the next year. Then it is of the utmost importance, which claim interest in the capital markets.” They would charge high interest rates that would have to Rome to rethink its Position.
ECB-powder fired
If it were not for the European would be the Central Bank. So far, she has to keep purchases a bond, with rescue loans, and the What-ever-it-takes-made promise, the Eurozone somehow. However, the ECB is slow at the end with your Latin. You will be first out of the bond program, and then from the zero interest rate policy get off buy, don’t want to run the risk that the economy in countries such as Germany runs too hot. But an increase in interest rates for government bonds, what would be poison for Italy. Another bad design of the Euro: A monetary policy is put together economies of very different people – one size fits all, but this is not fit all.
One thing is certain: Italy is eight times the economic strength of Greece, a different house number. The debt is escalating there is a crisis, not even the pockets of the ECB is not deep enough to save the country. With regard to the future of the Euro remains Joachim Starbatty so pessimistic: “Mors certa, hora incerta – death is certain, the hour uncertain.”